Placement and Prominence Requirements Are Key To Implementing Statutory Disclosure And Knowing Waiver Objectives
In Anna-Becky Redlich v. Reliance Management Group, Inc., Case No. A140313 (1/2 March 11, 2015) (Banke, Margulies, Dondero) (unpublished), the Court of Appeal agreed with the trial court that arbitration provisions between plaintiff homeowner, and defendants design firm and construction management firm, did not sufficiently comply with Business and Professions Code section 7191, which regulates arbitration provisions in a a contract for work on residential property with four or fewer units. The Court identified various problems, such as failure to include a title “ARBITRATION OF DISPUTES”, a reference to the Code of Civil Procedure in the contract that should have been to the Business and Professions Code, lack of bold, colored, or capitalized text, and defective placement of certain provisions. Analyzing the lack of statutory compliance under a “substantial compliance” standard, the Court of Appeal concluded that, given the disclosure and knowing waiver objectives of the statute, substantial compliance was lacking.
COMMENT: Several statutory schemes have prominence and formatting requirements for arbitration clauses. Prominent examples relate to health care service plans, Health and Safety Code section 1363.1, certain real estate contracts, Code of Civil Procedure, section 1298, and contracts for work on small residential properties, Business and Professions Code section 7191. Aim for strict compliance with the statute. One person’s “technical defect” is another’s “failure of substantial compliance.”